Canada amended the Competition Act in June of 2023 to prohibit employers from forming a non-poaching agreement and wage-fixing agreements with competitors.

It is now an offence of a criminal substance to enter into such a contract with third parties to prevent the solicitation or the hiring of one another’s employees. This is also so to conspire to decrease employee compensation.

This prohibition is stated to be of retrospective effect as it applies to such offending agreements made prior to the enactment of the amendments.

There are, however, exceptions to this new law. The participating companies must be at arms-length third parties. It is still permissible for two or more companies which are related or are part of the same corporate structure to engage in such agreements.

In addition, a company may be able to assert such an otherwise forbidden contract is necessary to establish an “Ancillary Restraint Defence” by demonstrating that this agreement is necessary to facilitate a desirable business transaction or obtain some form of operational efficiency.

All this being said, there is nothing in this Act which prohibits a non-solicitation covenant and/or non-competition agreement with its employees directly. This statement must be read in conjunction with Ontario’s Employment Standards Act which bans such a term apart from the sale of a business or for executive positions.

The amended sections of the Competition Act may be found here.